Bloomberg News

Poor Americans Lead Shift to Wireless Homes Abandoning Landlines

December 18, 2013

Poor adults in the U.S. continue to lead the shift to wireless-only homes, according to a survey by the Centers for Disease Control and Prevention.

About 55 percent of adults whose income falls below the poverty line had only mobile phones in their homes during the first half of the year, up 2.9 percentage points from a year earlier, according to the report published today. That compares with 35 percent of individuals whose incomes are at least double the poverty threshold.

As consumers move from landlines to wireless phones, low-cost and contract-free carriers -- like billionaire Carlos Slim’s TracFone Wireless Inc. -- have attracted attention over the $2.2 billion U.S. mobile-phone subsidy for poor Americans. Congressional Republicans earlier this year tried to rein in the program, saying it’s open to abuse and benefits the providers.

The Federal Communication Commission’s program, called Lifeline, subsidizes service and enables carriers to give away phones. Recipients generally can’t earn more than 135 percent of the federal poverty line, defined as $23,550 for a family of four in most states by the Department of Health and Human Services.

Some of the biggest U.S. wireless companies have added more prepaid subscribers through takeovers of low-cost carriers. AT&T Inc. (T:US), the biggest telecommunications company in the U.S., agreed to buy Leap Wireless International Inc. (LEAP:US) in July to gain more pay-as-you-go customers, along with airwaves to improve its network. AT&T had 7.4 million prepaid customers in the third quarter, while Leap had 4.6 million.

Trimmed Program

T-Mobile US Inc. (TMUS:US) merged with MetroPCS Communications Inc. earlier this year and had about 20.2 million prepaid subscribers in the third quarter.

Started in 1985, Lifeline pays companies $9.25 per customer a month. It disbursed $772 million in 2008 and $2.2 billion last year, according to the Universal Service Administrative Co., a Washington-based nonprofit that oversees the subsidies.

The FCC last year moved to trim the program and voted to set up a database of participants to prevent households from collecting more than one subsidized phone service from different companies. It also told carriers to check eligibility of customers annually, which can be shown through enrollment in social assistance programs.

The CDC in its report today showed the portion of all wireless-only households rose to 39 percent from 27 percent in the same period three years ago, while the portion of homes with both landlines and mobile phones fell to 50 percent from 58 percent.

The portion of individuals in wireless households, whose incomes are at least double the poverty threshold, gained 4.6 percentage points from a year earlier, the report said.

The CDC publishes the report twice a year, based on data from the National Health Interview Survey. For the survey, covering January to June, the NHIS obtained information based on in-person interviews, for 19,765 households that included 37,268 adults.

To contact the reporter on this story: Alex Barinka in New York at abarinka2@bloomberg.net

To contact the editor responsible for this story: Nick Turner at nturner7@bloomberg.net


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